During a recent business lunch, someone suggested I check out a company called Arcus Power, a software and data firm operating in the energy sector. On their website, I came across their vision:
“Arcus will go beyond efficiency and reshape how energy systems communicate. It will evolve the thinking from ‘Energy Transition’ to ‘Energy Expansion’ for the benefit of humanity.”
The moment I read “Energy Expansion,” I had an epiphany.
The term Energy Transition implies replacing one system with another; abandoning the old to make way for something new. For many people and organizations within today’s energy industry, that framing can feel threatening. It frames the future as a zero-sum game where traditional energy sources and workers may be left behind.
Energy Expansion, by contrast, is inclusive. It recognizes that the future of energy isn’t about the wholesale swapping of one technology for another, but rather is about adding more power sources, strengthening reliability, and equipping the grid with smarter controls. It acknowledges the complexity of our global energy needs and the reality that we’ll have to optimize every viable technology and asset class to successfully meet surging energy demand.
The reality is that global energy demand is surging, driven by AI data centers, EV adoption, and the electrification of everything. So, what we need isn’t a transition. We need an energy expansion.
Renewables Cannot Stand on Their Own
Renewable energy technologies like solar and wind have transformed the energy landscape, offering next generation, scalable power at increasingly competitive costs. But despite their many advantages, renewable energy sources alone cannot meet the full spectrum of modern energy demand. Beyond the obvious observations that the sun doesn’t always shine, wind doesn’t always blow, and batteries cannot store power indefinitely, there are deeper technical limitations that can’t be solved by scale alone.
Solar Power Limitations
Solar photovoltaics (PV) are inherently intermittent, producing energy only when sunlight is available. Even during the day, rapid changes in cloud cover can cause sudden fluctuations in output, introducing volatility into the grid.
But solar also lacks something that traditional generators like gas, hydro, or nuclear have in abundance: rotational inertia. In a traditional power station, massive metal rotors spin at thousands of revolutions per minute. These rotors store kinetic energy like a giant flywheel, resisting any change in speed.
When demand suddenly rises, the grid tugs at those spinning masses, but inertia keeps them turning smoothly, releasing stored energy and keeping frequency steady. When demand falls, that same inertia prevents the grid frequency from rising quickly, causing generators or inverters to trip offline. You can think of rotational inertia as a shock absorber, providing a physical buffer to smooth out the grid’s bumps and jolts.
By contrast, solar panels contain no moving parts and therefore provide no natural inertia to steady the grid. Without that built-in buffer, grid frequency becomes more sensitive to sudden changes in supply or demand, which can lead to grid instability and, in extreme cases, brownouts or blackouts.
Wind Power Limitations
Wind energy faces its own set of technical constraints. While steady moderate winds generate electricity efficiently, turbines cannot operate under extreme conditions. Gusts that exceed design limits or sustained high winds can force turbines to shut down to prevent damage, leaving gaps in generation. Likewise, low-wind periods may persist for hours or even days, reducing output when demand remains high. Even well-sited wind farms are subject to these natural limitations, which cannot be overcome simply by adding more turbines.
Battery Limitations
Battery energy storage systems (BESS) are often proposed as the solution to renewable intermittency, but today’s BESS technologies have practical constraints. Most utility-scale battery systems are designed with a maximum discharge duration of roughly 4 hours. This means that while they can provide critical short-term balancing and peak-shaving services, they cannot sustain power through extended periods of low solar or wind generation. For example, a multi-day weather pattern that blocks the sun or stills the wind would quickly exceed the capacity of current storage systems, leaving gaps in energy supply that must be covered by traditional generators.
Unlocking Renewable Energy with Thermal Generation
Despite these limitations, renewable energy brings undeniable benefits that make it essential to our future energy mix. Solar and wind power produce electricity without emissions, helping to reduce greenhouse gases and air pollution. They rely on abundant, freely available natural resources, which insulate consumers from volatile fuel prices. Moreover, renewables can be deployed at various scales, from solar panels deployed on the rooftops of homes or businesses, to utility-scale solar or wind farms, offering flexibility and the potential to bring power to communities that lack traditional grid access. While renewable energy may need support, their contribution to a cleaner, more resilient, and cost-effective energy system is irreplaceable.
I know this may be a controversial take, but the truth of the matter is that we need traditional dispatchable generating assets in order to allow for the deployment of renewable energy assets. Because renewable energy output fluctuates and is not always available when we need it, these resources must be supported by traditional power generators that can quickly respond to demand and ensure reliable energy supply.
So does this mean that we should only build traditional power generators and forget about renewable energy assets? Absolutely not, and here’s the reason why. Traditional thermal power plants rely on feedstocks such as coal, oil, and gas to generate electricity. The price of these fuels fluctuates over time, sometimes dramatically, depending on global markets, geopolitical tensions, and supply constraints. These fluctuations are passed along to consumers, leading to volatile electricity bills and financial uncertainty for both households and businesses. In extreme cases, sudden spikes in fuel prices can threaten economic stability or force utilities to ration power.
Renewable energy sources, by contrast, have no variable fuel costs. Once installed, solar panels and wind turbines draw their energy from sunlight and wind, which are free, abundant, and widely available. This means that the marginal cost of generating electricity from renewables is essentially zero, providing long-term price stability for consumers.
This is why maximizing renewable energy generation is essential. The more of our energy needs we can meet with renewable sources, the stronger and more sustainable our energy future will be.
And this is precisely what China is doing.
Lessons from China
There is a common narrative that you have likely come across before. It goes something like this: Why should we invest in renewable energy when countries like China are still building coal-fired power plants? On the surface, it sounds like a fair question. But dig a little deeper, and you’ll see why that logic doesn’t hold up.
The facts are striking. In 2024, China began construction on 94.5 gigawatts (GW) of new coal-fired power capacity, marking the highest level of new coal power construction in the country since 2015. China also plans to continue building new coal fired power plants until 2027.
While these headline numbers are eye-catching, they miss a critical component. Just because a plant is built doesn’t mean it’s running around the clock. How often these plants are actually used makes all the difference.
The average utilization rate for coal-fired power plants in China currently sits at around 50%. Further to this, China plans to phase down coal consumption between 2026 to 2030, with the China National Coal Association projecting coal consumption to peak in 2028.
Here’s the twist. While those massive coal plants may dominate the headlines, when they’re idle, solar and wind are the ones who keep society humming along.
In the same year that China began construction on 94.5 GW of new coal-fired power capacity, they also added a total of 356 GW of solar and wind, bringing the total installed capacity of these asset classes to 1,408 GW. That’s nearly one-third (33%) of the world’s total installed solar and wind capacity, which reached 4,443 GW by the end of 2024.
This monumental achievement isn’t merely about energy generation, it’s about establishing influence in a world where energy security and sustainability are paramount. With each new gigawatt of solar and wind installed, China moves from leader to architect, setting the stage for a new era in energy-driven geopolitics.
So why coal, and not something cleaner like natural gas? The simple answer is that China has huge domestic coal reserves and is largely self-sufficient in coal production. Using coal limits exposure to imported energy sources, which can be expensive and vulnerable to geopolitical uncertainties.
Why Canada Also Needs An All-Of-The-Above, Energy Expansion Approach
Canada is entering a period of unprecedented electricity demand growth. The rapid expansion of AI data centers, which require massive, continuous power, is just one driver. The accelerating adoption of electric vehicles (EVs) and the national push to electrify transportation, heating, and industrial processes are collectively creating a surge in electricity load that today’s generation capacity simply cannot meet.
Relying on a single energy source, or even a narrow mix of asset classes, can create bottlenecks, higher costs, and reduced grid reliability. Canada’s geography and climate add further complexity, with some regions experiencing seasonal extremes in demand, while others contend with variable renewable energy output.
An all-of-the-above approach incorporating solar, wind, hydro, natural gas, and emerging technologies such as small modular reactors (SMRs) and advanced storage is essential for maintaining grid stability and reliability.
Canada cannot afford to “pick a winner” in its energy strategy, when dramatic energy expansion is required for long-term energy security. The combined challenges of rising demand, decarbonization goals, and grid reliability necessitate a pragmatic, technology-agnostic approach that leverages the strengths of all available generation sources. Only an all-of-the-above approach can deliver the scale, flexibility, and resilience required to power Canada’s rapidly electrifying economy.
What Happens If We Don’t Keep Up
The rapid growth of AI technologies is a primary driver of increased electricity consumption and it’s already having real world implications on energy prices.
Data centers in the United States already consume roughly 4.4% of the nation’s electricity, and that number could jump to 12% by 2028. In regions where data center demand has surged, electricity prices have spiked. In some parts of the US, wholesale electricity costs have increased by as much as 267% over five years, a burden that ultimately falls on consumers.
This isn’t just a problem for our neighbours to the south, AI-related data centres are coming to Canada and they are coming in large numbers. Canada has ample hydroelectric power, particularly in provinces like Quebec, British Columbia, and Manitoba, which provides reliable, low-cost, and low-carbon electricity. Many parts of Canada also have cooler temperatures year-round, which significantly reduces the cost of cooling for data centers, which is one of their largest operating expenses.
And building more power generation is only part of the solution. Without upgrades, the existing grid could struggle under increased demand, leading to blackouts or service interruptions when electricity use hits its highest levels.
So How Should Canada Back-Stop Renewables
Canada has multiple options to support renewable energy assets, and development should prioritize technologies with the lowest environmental impact. While all power generation comes with environmental consequences, these impacts vary in severity and can be ranked accordingly.
Taking all environmental implications into consideration, including GHG emissions, air pollution, water use, land and habitat disturbance, and lifecycle impacts, here is how power sources rank:
- Run-of-River Hydropower
- Wind Power
- Solar Photovoltaics (PV)
- Geothermal
- Large-Scale Hydropower (Reservoir Dams)
- Nuclear
- Natural Gas (Combined Cycle)
- Coal
While the ranking above highlights the relative environmental impacts of various power sources, it doesn’t tell the full story. When we also consider untapped potential, deployment speed, and the ability to support grid flexibility, the order changes, with natural gas and geothermal emerging as key players alongside solar and wind. Policy efforts should therefore prioritize natural gas and geothermal, as they provide the flexibility needed to accelerate solar and wind integration.
Striking the Right Balance in Canada
As Canada accelerates its energy expansion, it’s critically important that we adopt a strategy that balances the deployment of renewable energy sources with the continued operation of thermal generation assets. This isn’t greenwashing; it’s a reality check. Accelerating renewables at scale requires a grid that still leans on traditional thermal power for stability.
An effective strategy involves a 1:1 build-out of renewable and thermal generation capacities. This means that for every megawatt (MW) of thermal generation capacity added, an equivalent MW of renewable energy capacity must also be developed. While this may seem radical and costly at first glance, in practice it’s both feasible and a highly cost-effective strategy over the long term.
By operating thermal power plants intermittently, as a back-up for when renewable energy assets cannot meet total demand, wear and tear are reduced, extending the operational lifespan of these power plants.
Maintaining and operating thermal plants, even at reduced capacity, also preserves jobs in communities dependent on these facilities, meaning that no one gets left behind. Workers can focus on maintenance, efficiency improvements, and ensuring that these plants operate optimally when needed.
China’s energy strategy underscores the importance of maintaining an energy mix of intermittent renewables and traditional dispatchable generators to meet growing electricity demands, while ensuring energy stability and security.
Critics of a 1:1 development strategy argue that it will create overbuilding, excess supply, and higher costs. But real-world case studies show a different story.
Why Overbuilding Makes Sense
Overbuilding of generation capacity is a strategic necessity.
California provides a real-world example of how overbuilding can enable remarkable renewable energy achievements. There are periods when the state’s electricity supply is entirely powered by renewable sources, with solar and wind meeting 100% of demand during peak conditions. These moments demonstrate that overbuilt renewables, when integrated with smart grid management and storage solutions, can temporarily eliminate reliance on traditional thermal power generation, while maintaining grid stability.
In addition, overbuilding power generation assets ensures spare capacity, providing a hedge against sudden surges in demand. The rise of AI data centers has shown that increases in electricity demand are not always gradual or predictable. When new demand hits a system operating at or near capacity, the consequences can be severe. Price spikes, grid instability, brownouts, and blackouts, all of which impose real hardship in an increasingly energy-dependent world.
Conclusion
The narrative of “transition” implies limitation, with a move forward necessitating that something must be left behind. But the reality is clear; with soaring demand driven by AI data centers, electric vehicles, and the electrification of everything, Canada cannot afford to rely on a single technology or a narrow set of assets.
The solution is not to choose between renewables and thermal generation, but rather to expand power generation across the board. A pragmatic, energy expansion approach ensures that we can harness the full potential of renewable energy when it is available, while relying on dispatchable thermal assets as insurance when it is not. By pairing new renewable capacity with flexible thermal generation, we can extend the lifespan of existing assets, create stable, well-paying jobs, and maintain grid reliability, all while advancing decarbonization goals.
Canada must embrace Energy Expansion, not mere transition. Policymakers, industry leaders, and communities must collaborate to deploy renewables, back them with reliable thermal generation, and build the infrastructure necessary to meet today’s and tomorrow’s surging electricity demand. The time to act is now. Every megawatt added strengthens our grid, protects our economy, and ensures that Canada remains powered, resilient, and competitive in a rapidly electrifying world.
